TMCnet News
Motorola's looks to reclaim trendsetter status(Chicago Tribune Via Acquire Media NewsEdge) CHICAGO _ Motorola Inc.'s co-Chief Executive Sanjay Jha is building a turnaround strategy based on smartphones, hoping to win back consumers clamoring for devices that can e-mail, surf the Web and update their Facebook page. It's a big bet that, if successful, could re-establish Schaumburg, Ill.-based Motorola as a trendsetter in some of the most competitive markets. Jha's plans also underscore the broader shift in the handset industry, as smartphones graduate from the early-adopter crowd to the mainstream as must-have devices. But the economy and Motorola's internal troubles, including Tuesday's announcement of its chief financial officer's sudden exit, could get in the way. Motorola's fourth-quarter results released Tuesday were dismal, with sales falling 26 percent on the year, to $7.14 billion, and net loss of 1 cent a share excluding items, versus a profit of 4 cents a share a year earlier. The mobile phone division's global market share is 6.5 percent, compared with 12.4 percent a year ago. On a conference call, Jha offered clearer details of a recovery plan that he outlined in October. For 2009, it's all about smartphones. This segment is profitable and expanding as consumers transfer their computer activities to mobile phones. One of Motorola's coming smartphones will center on social networking, for example. "What Motorola's trying to do is hit the pockets of growth that have the high margins," said Fred Boxa, a Chicago-based principal at IBB Consulting. But Jha's overhaul of the cash-draining mobile devices business faces distractions. The global handset industry is in decline. According to research firm Strategy Analytics, worldwide mobile phone shipments dropped 10 percent in the fourth quarter from a year earlier, the weakest growth rate since 2001. Motorola is putting drastic cost-cutting measures in place, including 7,000 layoffs and the elimination of its dividend. Chief Financial Officer Paul Liska abruptly left the company after less than a year. Co-Chief Executive Greg Brown indicated in an interview that Liska's exit was tied to Motorola's delayed plans to separate its handset business from its other two divisions. "Paul had come in under the pretense of a separation happening sooner rather than later," Brown said. "We felt that a change at this point in time made sense." The split had been targeted for the third quarter of 2009 and now is postponed indefinitely. Edward Fitzpatrick, previously CFO of the home and networks division, will fill Liska's shoes while Motorola conducts a search for a replacement. Liska is "known as a transaction or deal specialist, whether that be a spinoff, breakup or sale," said analyst Jim Suva of Citigroup. "He's not really a restructuring expert, and right now I think Motorola's focused on restructuring the handset division rather than breaking it off." (EDITORS: STORY CAN END HERE) The wholehearted pursuit of smartphones is a risky strategy. Apple Inc. and BlackBerry-maker Research In Motion Ltd. have established strongholds in this category, and Palm Inc. is launching a touchscreen smartphone called the Pre this year. Motorola's lineup won't be ready until year-end or early 2010, leaving it vulnerable for the first part of 2009. And it is anchoring its portfolio on Google's Android platform, an operating system that is relatively untested. A newly sharpened focus on mid- and high-tier phones also means that Motorola is pulling back in the lowest end of the handset market, where manufacturers compete on volume rather than margins. Jha said these low-tier phones generally were made for consumers in India and Southeast Asia. "In that tier, we have deprioritized our efforts, largely because over the last few years ... we've not made any meaningful amount of money consistently," Jha said. "While we have to preserve our resources, we've focused on smartphones and bringing data-enabled capability down to the (mid) tier. "That is actually a much larger growth area, and an area where there's greater ability for us to differentiate and get profitability." If Jha can't produce awe-inspiring phones by the fourth quarter, the voices of critics questioning whether Motorola should quit the handset business likely will get louder. As Suva put it, "Is this the third year Motorola misses Christmas?" ___ (c) 2009, Chicago Tribune. Visit the Chicago Tribune on the Internet at http://www.chicagotribune.com/ Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. Copyright ? 2009 Chicago Tribune |